A “wellbeing budget” or a first step towards one in the future? Finance Minister Grant Robertson himself called the budget “just one step in a longer process of reforms and used the words “first step” in his media conference answering a question on the mental health package.
[Published in Policy Quarterly, May 2019, https://ojs.victoria.ac.nz/pq/article/view/5363/4692]
Climate change impacts are local. Local dwellers and their councils have no choice but to prepare and adapt. But climate change is global.
So, while local dwellers and councils can contribute to reducing the impact, effective action needs national governments to act – and act in concert. Even local preparation for climate change impacts needs national government engagement. For example, property rights can be affected and they are necessarily defined in national law.
Our country was not “forever changed” on 15 March. Jacinda Ardern’s assured skill, instincts and empathy kept the nation on course.
But can she generate the innovative policy that will be necessary to keep that nation intact through the turbulent 2020s. Or is she a pivot between two eras, not the architect of a new era – as Norman Kirk was a pivot between the 1940s-60s orthodoxies and the revolutionary 1980s?
Do capitalists want to save capitalism? If they do, they will need to change substantially, says Colin Mayer of the Oxford Business School in a recent book.* And the change he wants fits neatly into Grant Robertson’s “wellbeing budget” ambitions.
Mayer is not from the liberal-left, signposting a “post-capitalist” era, as in numerous books. He explicitly rejects socialism. He wants corporations to wake up to the need to repurpose themselves and wants politicians alongside.
His bother: under the ruling doctrine of Milton Friedman, corporations’ articles of association and the law in countries like ours require them to maximise shareholder returns. That has become their dominant purpose.
Some, like Unilever or our state-owned New Zealand Post, both members of the International Integrated Reporting Council, commit to declaring and reporting on additional objectives such as reducing greenhouse emissions and treating employees as valued assets. But even for those companies, such objectives are ultimately subordinated to maximising shareholder return. They amount to doing nice things on the side in pursuit of what some awkwardly call a social licence to operate.
Moreover, Mayer says, the dominant shareholders – “owners” – are now not individuals as in decades long gone, but the likes of hedge funds, investment banks, pension funds and other financial entities.
Mayer argues this “financialisation” has contributed heavily to widening wealth and income disparities and environmental degradation, which has eroded trust in business.
As other analysts have pointed out, erosion of trust is a factor in the rise of populism in various forms across Europe and the United States, including Brexit, France’s gilets jaunes and Donald Trump. Populism spawns erratic policy, which damages profits and can stifle business.
Put another way, capitalists behaving badly or socially irresponsibly pose a serious risk to capitalism in democracies.
And that is at a time when imperial China’s contorted and distorted version of capitalism is posing a challenge to the democracies’ version, which has, in Mayer’s words, “been the source of economic prosperity” through several centuries.
So is this just a matter for distant global corporate CEOs who were handwringing about populist politics at Davos in January?
Winston Peters thinks it applies here, too. Peters is the nearest we have to a populist and is not liberal-left. Announcing his coalition with Labour on October 19 2017, he declared: “Far too many people view capitalism not as their friend but as their foe. And they are not all wrong. Capitalism must regain its responsible, its human, face.”
Mayer says that requires corporations to repurpose. He draws a loose analogy with personal purpose: “Profit is not a purpose any more than the pursuit of happiness is a purpose of mankind. Profit maximisation is as unlikely to create wealth as hedonism is to achieve happiness.”
He goes on: “Profits and happiness are the products of a successful commercial venture and a fulfilling life and the outcome of the attainment of success and fulfilment.” Happiness comes from “some contribution, some project that leaves a legacy, however small”.
If corporations are to regain public trust, their purpose needs to take account of and account for their impact on natural, human and social capital (in addition to financial capital), which are vital for human “wellbeing” — the genuine “prosperity” that is Mayer’s book’s title.
So profits should be net of any costs of degradation of those capitals. Otherwise, Mayer says, they are “fake profits”.
Mayer’s natural, human and social capitals prescription is eerily similar to Grant Robertson’s for the government in his “wellbeing” budget. Jacinda Ardern featured this “wellbeing” aspiration in her speech at Davos.
The issue Mayer raises for Ardern, Robertson and Treasury acolytes is that the government is not the whole “wellbeing” story. To make it really work they will likely need corporations – business – alongside. And the corporate repurposing that requires will need major corporate law and regulatory reform.
That is a big ask for Robertson and Ardern, who are not radicals. But if Mayer’s thesis were to take hold in international democratic thinking as Friedman’s did leading up to Rogernomics in the 1980s, who knows what might emerge a decade or more down the track?
* Colin Mayer, Prosperity. Better business makes the greater good (Oxford University Press, 2018).
On Thursday Grant Robertson will get in the ring for his latest wrestling bout with Steven Joyce’s $11.7 billion hole. And he will polish up his “wellbeing” a bit more.
The wrestling will be in the half-yearly economic and fiscal update (HYEFU). The polishing will be in his Budget Policy Statement (BPS).
Joyce divined his hole in Labour’s fiscal numbers in last year’s election campaign.
Independent economists could not find it. Labour ministers say they have since found it — in Joyce’s under-resourcing of the likes of hospitals and schools, conservation, justice and social housing.
That is a legacy of Sir Bill English’s “more with less” demands of government agencies (ministries, departments and Crown entities) even while celebrating high immigration which piled more pressure on housing and services.
But wait, there’s more — or, rather, less. In the current round of allocations for the 2019 budget, agency chiefs have been telling ministers (and me) of cutoffs in what was thought to be “baseline” funding — that is, ongoing funding, maintained year-to-year.
This includes programmes that did have a cutoff date and so funding only up to that date but which have not been completed and/or have become embedded in agencies’ workload and staffing and so in effect, core activities.
The cabinet thinks some of these are “critical”, Robertson says, instancing work on sexual and domestic violence, a priority for both major parties, funded for only two years.
In addition, the coalition cabinet has made heavy demands on agencies for new or reshaped policies. Over the past year chief executives have told ministers (and me) they don’t have the “capability” in staff numbers and quality to meet those demands.
Result: ministers have been asked to look for programmes they could drop, so the “critical” ones can be funded. Ironically, that echoes Sir Bill’s demands in his early years as Finance Minister.
And all this has to be fitted round Shane Jones’s 1970s-type bountiful beneficence to the provinces. Is there looming a few years from now a rerun of the collapse of Matai Industries, a 1972-5 Labour government regional development initiative?
Then there is Robertson’s need for a cushion against a possible convulsion in the disturbed global economy, which serious northern hemisphere commentators increasingly worry about. While our economy is still fairly strong — attested to by none other than Simon Bridges (whose leadership test will come in the barbecue season next month) — Robertson’s cushion may suddenly be needed.
So the cabinet has felt bound to resist strikes by teachers, nurses, midwives and others, for whom “more with less” turned into work overload on constrained pay.
That’s the fiscal side of Thursday. The BPS will aim to flesh out a bit more Robertson’s drive to gear future budgets to “wellbeing”, not just fiscal and economic management.
Last Tuesday the Treasury unveiled an interactive “dashboard”, a first-blush scorecard of how we are doing on 12 measures covering, in addition to how materially well off we are, our societal, civic, educational and personal welfare and the state of the natural environment and resources.
The aim is to widen the policy yardstick far beyond the decades-long primacy given to GDP, the production of goods and services.
Robertson wants success measured against “outcomes”. Sir Bill used to talk about this but mostly pursued narrow “targets”. Genuine outcomes are complex, crossing portfolio and even generational boundaries. They need new funding and governance instruments.
Robertson’s top priorities — mental health, with a youth focus, child welfare, Maori and Pasifika and the transformation to what are expected to be very different economic and work arrangements in the 2020s — cannot be fitted into the current hierarchical “silos” commanded by chief executives.
So ministers and agency chiefs are now supposed to take collective responsibility for work on each priority, not just leave it to a lead minister and agency.
Robertson talks of funding outcome-oriented action through a single allocation. The consultation document for revised public service legislation suggests four mechanisms for agency chiefs to work together, including “boards” of chiefs.
Reports vary on how well ministers and agency chiefs are actually operating collectively. Politics is a tournament of rivalry. The 1988 reform embedded agency chiefs’ authority in their fiefdoms.
So Thursday’s BPS will be “work in progress”, with up to a decade of refinement ahead to make “wellbeing” convincingly credible, then translatable into effective action.
Moreover, the government’s actions on the ground so far depict it as one more of alleviation than the aspiration “wellbeing” implies. Robertson aside, the word doesn’t yet pepper most ministers’ speeches and statements.
Only when they talk up “wellbeing” ad nauseam might voters start to think it is more than a word in the clouds.
Meantime, there is Joyce’s hole.
Sunday is the centenary of Armistice Day — the end of fighting in the “war to end all wars”, which turned out to be only an instalment.
By the eleventh hour of the eleventh day of the eleventh month of 1918 16 million had died in the war and 20 million were physically and mentally maimed, many seriously.
Three empires, the Austro-Hungarian, German and Russian, had also died and the Ottoman empire went in 1920. A fifth, the British, never recovered from its wounds. Neither side “won”.
Crippling reparations against Germany and global economic depression after a cocksure United States crashed its hyperinflated sharemarket tipped Germany fascist and warlike. The next war instalment from 1939 was far more devastating.
After that came the cold war between United States-led liberal democracies and totalitarian Russia. Russia lost.
A post-1945 international order of growing economic interdependence among liberal democracies included Germany. Technology and trade lifted billions out of poverty, most spectacularly in China which chose economic development over ideology. Democracy gained ground globally.
That has reversed. Freedom House reported 2017 was the twelfth consecutive year of “decline in global freedom” and democracy.
Populism, “illiberalism” and autocracy have spread as hyperglobalisation has enriched the already rich in democracies and as multitudes fear for their personal status and national identity.
Germany’s Europe-stabilising politics are fragmenting, dramatically so in two recent state elections. Brazil elected a president who extols violence.
The (Dis-)United Kingdom voted to leave Europe. Tomorrow’s election in the (Dis-)United States won’t return it to political health. Its presidential advisers tote their trade war with China as a new “cold war”.
A once-again ideological, autocratic China aggressively stakes territorial claims, entraps poor nations in “loans” for infrastructure and recruits overseas Chinese to influence politics, universities and other institutions in countries like ours.
The Middle East is deeply riven. Outside powers meddle there.
The global order is as brittle as in 1914 — and 1918.
And the global economy is seriously unbalanced, not least by a 75% rise in debt since 2007. Growing numbers of sober commentators fear — some forecast — a shock far worse than in 2007-08.
How does New Zealand navigate this? Can we avoid a “Thucydides trap” between two superpowers, the conundrum for small states when Athens and Sparta fought in the fifth century BC.
New Zealand, Australia and Japan fret over China’s push into the South Pacific. Some expect China to announce a free trade agreement with Papua New Guinea at the APEC summit next week, with Fiji also in its sights. It is seeking military bases in Papua New Guinea and Vanuatu.
Jacinda Ardern came to the job of responding to this “chaotic” world, as she terms it, citing Russia in particular, with experience in Helen Clark’s office and as International Union of Socialist Youth president, which bequeathed her a wide range of foreign contacts she now draws on, many at high level.
Her approach: be strategic, based on values, for example, human rights, a rules-based order, free trade (she very early took a firm pro-TPP stance in cabinet) but also be nimble, applying “craftsmanship” to diplomacy.
Brook Barrington, who heads her Department of Prime Minister and Cabinet from February, initiated a (limited, some say) strategic rethink as Secretary of Foreign Affairs.
Ardern draws also on the incisive intellect of chief trade negotiator Vangelis Vitalis who talked of the “Thucydides trap” long before eminent thinkers elsewhere.
Her strategic guide is to reassert foreign policy independence from all powers and not back off criticising China on the South China Sea (as the defence strategy did in July) and its oppression of the Uighurs and Donald Trump’s trade “nonsense” and human rights breaches — but equally to look for ways to work together, as with the United States in Antarctica and in monitoring North Korea sanctions and with China in the proposed Regional Comprehensive Economic Partnership.
The Pacific reset in May was a first strategic step, talking up real engagement and cooperation with island states and working with the likes of Japan to build resilience so those states need China less for help (and debt).
Ardern and Winston Peters have had differences, notably on Russia, but broadly agree.
But is this the transformation she has promised for policy generally?
Some say the Pacific reset could have gone further, for example, setting up a development bank, as Australian Labor leader Bill Shorten has flagged.
In her party conference speech on Sunday foreign affairs came up just once: calling Grant Robertson’s fiscal caution “insurance” in a “volatile international situation”.
Down the track she might have cause to reflect on the transformative 1914-18 war and transform foreign policy nimbly into a front-of-mind matter.
Jacinda Ardern is 38, James Shaw 45, Grant Robertson 46. They have much to look ahead to. Winston Peters is 73. He has much to look back on and an respectable retirement to look out for.
Shaw’s Greens are to Ardern’s left. Peters’ New Zealand First is to her (populist) right. Each has heft — Labour is much the biggest but it needs the votes of both to outgun National.
New Zealand First has to walk atop a narrow fence: be distinctive and visibly influential to stay above 5% in 2020 (if there is no rescue through an electorate seat deal) but not so distinctive as to fuel commentary (as in August-September) that Peters is driving the bus — off the road. Disunity kills governments.
The Greens look more sure of 5% but are on a boardwalk through a wetland: between compromise and purity, between governmental grown-up-ness (limited wins) and political adolescence (keeping ideals — and impotence — intact).
Green MPs have mostly opted for grown-up-ness, not least by swallowing Peters’ putrid waka jumping rat. But Marama Davidson’s election as co-leader indicates most party members lean to adolescence.
At least as testing for Ardern are drop-the-ball Labour ministers — Clare Curran, Meka Whaitiri — and fumblers.
Kelvin Davis (reminder: Labour’s deputy leader) has to get post-settlement Crown-Maori relations right if there is not to be another Maori party. On marae he is said to have won over opponents to new thinking. But in general forums he is often fuzzy.
David Clark has the intellect and inner strength to repair the health system when through his multiple reviews but so far often sounds more the preacher he trained to be than on-top manager.
Add in public differences, mainly between New Zealand First (think Shane Jones) and Labour ministers — examples: three-strikes abolition, workplace law. By August-September the authority a government claims and needs was looking ragged. Political management was wobbly. Ardern felt a need to do two major “reset” speeches.
A different Clark (Helen) — whose out-of-place lofty observations on how to govern have infuriated some in the Beehive — would have set chief of staff and enforcer Heather Simpson to work with and on them. Ardern chief of staff Mike Munro is not a stick-wielder.
But Clark (Helen) didn’t have to ride Ardern’s three-headed beast. Detail needs to be cleared through cabinet. Answers to questions on issues not yet cleared can look, in feverish media reporting, like fissures when they are work in progress.
There are tensions, miscues and mistakes. But there are within parties, as Simon Bridges (yet to live up to his potential) could tell you. The issue is how well and consistently tensions are resolved.
Fixing political management took Sir John Key and chief of staff Wayne Eagleson a year or so.
Can Ardern? She and Peters have mutual respect, even liking, despite wide divergences in age, mentality and policy disposition. Shaw is cooperative.
And Ardern can be firm (as Neve will find in her terrible twos). One hardened MP told me a ticking off from her during last year’s campaign outdid any from Clark (Helen). Meka Whaitiri can be in no doubt.
Ardern’s approval ratings are still stratospheric — not (so far at least) showing symptoms of a Justin Trudeau/Emmanuel Macron change-leader-gone-sour plunge. The right-track/wrong-track reading is still very positive. And there is a half-dozen of strong ministers.
But words are not deeds. She needs in her second year to turn the myriad reviews and consultations (examples: climate change, mental health, tax) into actions people can see, feel and want.
Mostly so far the government has been filling potholes Sir John left. Forward-pointing actions are appearing but there is not yet real momentum. And to be convincing in 2020 the government needs a wraparound theme.
For that go to Ardern mate Robertson, her real deputy. He is getting on top of finance, the recent Mood of the Boardroom survey recognised and some officials say. He has (so far) faced down striking nurses and teachers (who seem, puzzlingly, to want National austerity back in 2020).
More important is his attempt to reframe government action as promoting much wider “wellbeing” than material stuff and as relevant for the 2020s. His speeches, including recently on the arts’ contribution to wellbeing, do that well.
Climate change, on which there is a fair chance of cross-party agreement from regular meetings between Shaw and National’s Todd Muller, fits. So does much of the social programme.
But “wellbeing” is a hard story to get across to the media, let alone voters. To bed it in — with testable numbers — Ardern needs a second term. And for that she needs a strong story, especially if there is a global financial or other catastrophe. She hopes to have that story by early 2020.
Will she? Will there be a fourth anniversary? Answer that in 23 months.
[Adapted from paper for ASPG conference, Brisbane, 17-18 July 2018.]
Wellington 12 September 2018
“Trust in Parliament in a post-truth world” was the title for Australasian Study of Parliament Group’s annual conference in Brisbane in July. It is a pertinent question at a time when populism has been rising in liberal democracies and may rise more…
ASPG NZ version 18Sep12
The economy is about to crash, “business” is telling us. The Institute of Economic Research, by contrast, forecasts just-under-3% growth through the next five years.
Business wants National back in charge in 2020. That is a tribal reality. Simon Bridges would make business growth No 1 priority.
But will business’s negativity be self-fulfilling and take us back to the depths of the global financial crisis, as the ANZ Bank business confidence poll suggests?
Is it time to join the cabinet panic about the poll, evidenced in Jacinda Ardern’s “flashing great neon sign” pitch to big business last week?
There is Trump, China, oil prices, steeply rising global debt, overpriced sharemarkets and political-meltdown Australia. But not yet precise signposts to imminent disaster.
Is business is missing the point?
The Australian newspaper — which helped oust Malcolm Turnbull — last week headlined “news” from the Harvard Business Review that “workplaces benefit when employees feel that their efforts are being appreciated by their managers”.
This decades-old rubric might be news to ANZ poll respondents, Harvard and The Australian. But it is not to (future National MP?) Christopher Luxon, Air New Zealand boss and chief of Jacinda Ardern’s new business advisory council.
Luxon and the E Tu Union have a deal involving workers in some management decisions. Result: less aggro and higher productivity. Grant Robertson featured it in his 2016 “future of work” conferences.
Shane Jones trumpets a different view of Luxon. New Zealand First needs provincial anger at Air New Zealand to help it clear 5% in 2020. Hence another blunt Jones challenge to his Prime Minister — not a signpost to a second term.
For Jones it often seems to come down to: “The show must go on.”
But what exactly is the show? Dollars?
Yes, say Bridges’ press releases. He is touring grumpy small business.
Not many people would say no to more dollars — no matter how many they have, behavioural sociologists say.
But there are other things they want more of, too, or at least a fair crack at. Dollars don’t guarantee a good life. They are an aid not an end.
Which is the point of Robertson’s push for “wellbeing budgets”.
The 2019 budget, he says, will be more a change of form than the endproduct. He hopes for more for 2020.
The Treasury — short of capability, along with a number of agencies — won’t be able to get enough credible numbers by budget 2019 to fill out its living standards framework and flesh that into the “wellbeing economics” it has been exploring from early 2015.
Treasury’s exploration has a way to go yet, maybe way past 2020. It is still producing background papers, most recently on financial and physical capital, culture, the United Nations sustainable development goals and resilience in the face of risk.
Still, Robertson’s show goes on. Tomorrow he opens the third international wellbeing conference in Wellington.
Victoria University (VUW) and the Treasury are sponsoring this three-day affair. VUW urban geography professor Philip Morrison, who studies subjective wellbeing, is one of the original organisers of this conference series and heads this one’s organising committee.
Former Reserve Bank chair Arthur Grimes, now VUW professor of wellbeing and public policy, is on the organising committee.
Offshore keynoters include Edward Diener, an Illinois University psychology professor who advises pollster Gallup on measuring psychological wellbeing, Martijn Burger, director of the Rotterdam Erasmus Happiness Economics Research Organisation, Carrie Exton, head of wellbeing monitoring at the Organisation for Economic Development, and Jan-Emmanuel de Neve, an Oxford University behavioural economist.
Onetime National MP Marilyn Waring, world famous for her work on unpaid work, will inject some scepticism. Lincoln University’s Paul Dalziel, quoted in the 2015 Treasury “wellbeing economics” work, will update his take. Carla Houkama will inject a Maori perspective.
A Bridges government from 2020 would likely back away from this guffy stuff. Most business would cheer.
But hard-dollar capitalism has been its own enemy in recent decades, helping breed burgeoning populist politics in northern democracies.
A rigorous — emphasise rigorous — injection of wider “wellbeing “into economic discourse and practice could lift public confidence in capitalism.
To make it work the government needs to reorganise the way it thinks and acts. “Wellbeing” goes far beyond National’s simple 2011-17 “targets”, to complex “outcomes” which make real change in people’s lives. That requires government agencies to collaborate.
And that requires major state sector reform. Chris Hipkins is due to issue a discussion paper today. An aside: the paper is said to back a three-person state services commission in place of the current single commissioner, Peter Hughes.
Hipkins and Robertson see their reforms as interlocked.
Can business catch up? Or is grumping what it does best?
Winston Peters wants to stop defections. Defectors from his party kept Jenny Shipley’s government afloat in 1998 after she fired him. An Alliance MP also defected, prompting a short-lived waka-jumping law in 2001. In the 2011-14 Parliament New Zealand First kicked MP Brendan Horan out of the party but he stayed on as an independent.
The waka-jumping bill presumes voters elect parties. The pre-MMP presumption was that voters elected MPs who happened to be in parties but could switch if they chose.
So in effect the waka-jumping bill adjusts the constitution (badly) — not the Constitution Act but one of the many other elements of the broad, small-c constitution that moderates society and regulates politics.
A positive adjustment would be to enact the Electoral Commission’s 2012 report required when in 2011 voters reconfirmed MMP.
The then Justice Minister Judith Collins parked it. Proper process would have been to get a bill drafted off the report for Parliament to decide, as Andrew Little scathingly alluded to in Parliament last Thursday.
The commission wanted to end the “waiver”, by which a party winning an electorate seat gets seats proportional to its party vote even if it falls under the 5% threshold.
Winston Peters in 1999 held Tauranga and brought in four other MPs. The Key-English government in 2008 got ACT five seats by giving it Epsom.
The Electoral Commission proposed to compensate for ending the “waiver” by cutting the party vote threshold to 4%.
This would almost ensure New Zealand First and the Greens survive the 2020 election. Peters wants to keep 5%, even though his party fell to just over 4% after both its previous coalition ventures.
There is another twist. Nearly 2% of the 7% who voted New Zealand First in 2017 told pollsters they preferred Peters going with National. Might they not think Peters waka-jumped by going with Labour?
All this assumes Parliament is what our democracy is about. Actually, democracy is about the people.
The Australasian Study of Parliament Group conference this month worried about declining trust in Parliaments “in a post-truth world”.
One option discussed was to develop and expand randomly selected representative “citizens juries” to inform and influence policy decision-making.
Why stop there? Modern technology enables “crowd” solving of technical matters, fund-raising and organisation. The Council of Trade Unions, for example, is starting to use its “crowd” to build its policy and legislation submission cases.
Some commentators are exploring the potential to use “crowd” techniques to feed into law-making — in effect, to make “citizens juries” vastly broader (and semi-official?). That might activate younger people, many of whom don’t bother to vote for oldster (over-35) MPs.
Policy involves far more complex judgments than fixing a bit of software or organising some money or action. So at the very least it would need years of refinement and development.
That takes us to “localism”, Local Government New Zealand’s push for a bigger role for councils and more sources of funding. Ours is the world’s most centralised democracy. Bringing more government to points closer to the people would be serious constitutional change.
And councils, being local, could be the place to trial “crowd” engagement in decisions.
If the “crowd” gets more involved, what is the public service’s place?
A discussion paper is due soon on the push by State Services Commissioner Peter Hughes and minister Chris Hipkins to update the public service, 30 years after the last big reform.
They want legislation, now being drafted, to set out purpose, principles and values for the state sector and rename it the public service, implying serving the public, not just ministers — a much-needed small-c constitutional reform.
The discussion paper also sets out four ways to break down the “silo” walls between departments and get unified, seamless pursuit of the complex “outcomes” Grant Robertson wants. There is a Crown-Maori section and an intergenerational dimension.
Chief executives have pushed back. They say rushing change risks a half-baked outcome.
A number also say they don’t have the capability to do the policy innovation work the cabinet wants. (Note: “capability”, which is not the same as “numbers”.)
That’s not the only edgy matter. Is free speech a core element of our constitution? Some freedom-lovers stumped up loads of cash so two Muslim-baiters could speak here.
Freedom is just being free from any constraint. The real democratic issue is liberty for all to live a full life. That implies for each citizen a responsibility for the liberty of others. Unconstrained vitriol can curtail the liberty of those attacked.
Liberty is the core of our constitution. Does the waka-jumping bill fit?